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Alexander Taberne's Blog

By Alexander Taberne | Mortgage Broker
or Lender in Voorhees, NJ

    Posted Under: Home Buying in Turnersville, Home Selling in Turnersville, In My Neighborhood in Turnersville  |  March 31, 2012 8:17 AM  |  498 views  |  No comments

    Fannie Commission Income: I have a borrower who is 100% commissioned. On the job for 5 years. Income has been declining $10,000 each year from the last 3 years. What income should I use to qualify?

    Fannie Guidelines specifically state "Annual earnings must be level or increasing from one year to the next." This means the underwriter can deny the loan for this reason alone. Freddie UW rules allow for decrease in income so long as decrease can be explained  – Underwriter must be able to justify that income used is stable and will continue (difficult to do) – lower amount must be used. With either Fannie or Freddie, declining commission income is very difficult to deal with for the underwriter. If the file is marginal, the loan will likely be declined. But if you have long job history, large down payment, low ratios, high credit, and significant reserves, you may have a good case to make for the approval of the loan.

    I run into these issues every week and I see the banks really tightening on there income calculations. If you are running into these issues let me know if I can help!

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